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The Hot Ticket Isn't Ticketmaster

September 03, 2006

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Zach Nelson, CEO of software supplier NetSuite Inc., doesn't have a lot of time for entertainment. But when he wants to see a concert, say Snoop Dogg in Las Vegas last year, he wants good seats. Nelson doesn't even try Ticketmaster. He logs right on to StubHub.com, an open marketplace where fans, amateur speculators, and ticket brokers unload tickets at whatever price they can get. Nelson picks his seats, happily pays up, and bam, he's set.

Millions of others are doing the same, which is why a $2 billion online market for hard-to-find tickets has sprung up and is doubling in size each year. Most of the action is on eBay Inc. (EBAY) and StubHub, where anyone can list a ticket for any event, and anyone can buy them. Other fast-growing outfits such as RazorGator, TicketsNow, and TicketLiquidator cater more to ticket brokers.

Ticketmaster, the titan of traditional ticketing, is none too happy. And it's fighting back hard. It has expanded its fledgling TicketExchange resale site to include concerts and other events, putting it in direct competition with eBay, StubHub, and the rest. In the spring, the unit of Barry Diller's InterActive Corp. (IACI) launched a lobbying campaign in some states to get legislation making online ticket buying and selling for even $1 over face value illegal unless the team or venue controls it and gets a cut of the proceeds. That would be an advantage for Ticketmaster, which already has many such deals and has struck exclusive agreements with some 44 pro teams to resell season seats on TicketExchange. Ticketmaster has gone so far as to "turn off" tickets that were resold on sites like eBay and StubHub by invalidating the bar code.

The war of words is just as nasty. On the TicketExchange home page is a link reading: "Been Scammed by a Scalper? Click here to tell us what happened; we might be able to help." It asks fans to detail their stories, and under "where did you buy?" offers options including eBay, StubHub, Craigslist, TicketsNow, RazorGator, and a generic "street corner scalper." There's a box to check if you're willing to talk to the press. David Lord, CEO of RazorGator, cries foul: "We sold 10% of last year's Super Bowl tickets and didn't have one fraudulent ticket."

MARGINS, SHMARGINS

Cut through all the rhetoric, and this is really a dispute about whether a concert or game ticket is inherently different from other items people can buy and sell online. Ticketmaster President Sean Moriarty maintains that he is protecting the interests of his customers: the stadiums, concert halls, promoters, and teams that put substantial money at risk to stage an event and that essentially leave billions on the table when other people resell the best seats at higher prices. Fans should be able to buy and sell tickets, Moriarty says, but with restrictions -- similar to the rules that govern stock trading. "If a team or venue wants to put certain conditions on their retail product, they should have the right to do that," says Moriarty.

Resellers have no interest in protecting margins of teams and venues: Their customers are fans and speculators. In fact, while tickets frequently go for more than face value, they don't always. Resellers argue that by letting buyers see hundreds of tickets for an event on one screen, as opposed to dealing with a local broker or parking lot scalper, they force speculators to compete with one another.

In the eyes of the upstarts, Ticketmaster is just another entrenched industry trying to protect its turf. To StubHub founder and CEO Jeff Fluhr, who started the service in a dorm room at the Stanford University School of Business six years ago, the outcome is inevitable. He points out that Ticketmaster's efforts to craft legislation have so far come up dry.

Meanwhile, StubHub has grown to be the largest ticket resale auction site after eBay. More than 1,000 fans at Madonna's June 6 performance at New York's Madison Square Garden got their tickets through the site. Taunts Fluhr: "Bring it on, Ticketmaster."